A new penalty regime comes into effect for the tax authority affecting thousands of taxpayers and businesses that have already submitted (or will submit in the future) late tax returns. The Ministry of National Economy and Finance is correcting a long-standing distortion in the Tax Procedures Code, drastically limiting cases where administrative penalties of 100, 250, or 500 euros are imposed for each filing omission.
The exemption will cover taxpayers who, as often identified in AADE cross-checks, neglect to file returns – or rush belatedly to file them late – provided no tax is due for payment, or the amount is very small.
Tax penalties for late returns eliminated
The fundamental change (under article 37 of the law) is that the tax administration will no longer indiscriminately impose penalties on those who fail or delay filing any return. The provision does not completely abolish sanctions for late returns. However, it rationalizes or eliminates penalties for formal violations that have no collection or fiscal impact.
The changes take effect immediately after publication of law 5301, from May 15, 2026. For those who have already paid related amounts, the law stipulates that the state will refund them – retroactively from 2024.
Who avoids the penalty
Under the new regime, according to article 37 of the law as now in effect, penalties will not be imposed going forward for the following main categories:
– Late initial income tax returns when a zero or credit assessment is issued, as well as when the assessment results in a tax amount payable up to 100 euros.
– Late initial “informational” returns whose submission does not create a tax payment obligation.
– Late initial or amended returns for indirect taxes, duties, or contributions (excluding VAT and FMA) when the tax payable does not exceed 100 euros.
– Late initial withholding tax returns (excluding gambling tax returns) if the amount to be remitted does not exceed the same limit (100 euros).
Additionally, no penalties will be imposed on late returns filed on behalf of a minor, or by an adult for obligations relating to a year when they were a minor. The exemption also covers the parent’s income tax return, insofar as it concerns income of a minor child added to their own.
For late initial VAT returns the penalty remains but, if no tax is due for payment, the penalty is reduced to 100 euros, instead of 250 or 500 euros that applied depending on the professional or business category. Additionally, the 100 euro penalty for special VAT regimes is abolished.
Exemption also applies to amended returns filed by taxpayers to correct errors in initial returns. Penalties are not imposed for filing:
a) Late amended income tax returns for individuals or legal entities, if the additional tax amount due for payment, compared to the initial return, is up to 100 euros,
b) Late amended VAT returns or withholding tax returns, provided the related initial return was filed on time.
Refunds and two-year retroactive application
The new regulations will apply retroactively from April 19, 2024. However, for those who have already been assessed and paid penalties, the amount will not remain with the tax authority but will be refunded. For this purpose, relevant instructions from AADE are expected on how penalties issued in the last two years will be canceled or reduced, or how amounts paid by taxpayers will be offset or refunded.
In practice, if penalties for such violations have not yet been imposed or collected when the law takes effect, the process will stop. These amounts will not be pursued for collection. A similar procedure is expected to be followed when the penalty is not completely eliminated but reduced (to 100 instead of 250-500 euros for VAT returns). The penalty decision is modified, the debt is recalculated, and unowed amounts are refunded or offset.
